Corporate and LLC Law

Our corporate and LLC law practice focuses on the formation, structure, and operation of business entities. Business owners must understand and carefully choose the structure that best matches the needs of their company while ensuring they are sufficiently insulated from personal liability. The corporate and LLC law team at Harshman Ponist Smith & Rayl is experienced in incorporating new businesses as well as providing ongoing support through our business law and commercial transactions practice areas. Our deep expertise in the disciplines of contract law and contract drafting – two practices woven into nearly every aspect of business law - underpin the support we offer to businesses at all stages of their life.

Although there are several potential forms business entities can take, most new businesses are structured in one of two ways: either as a corporation or as a limited liability company (LLC). Both are meant to limit personal liability for owners of the company. However, neither corporations nor LLCs offer absolute protection. In some cases, a court may “pierce the corporate veil,” bypassing the liability shield of the business and holding the shareholders of corporations or members of LLCs personally liable for the obligations of the business. Our expert attorneys know the common mistakes that lead to piercing the corporate and can help business owners receive the best possible protection.

There are several factors that a court considers in deciding whether to pierce the corporate veil, one of which is whether the owners of the business have observed all the required corporate formalities. For example, a court may look at corporate records to determine whether a corporation has a board of directors, whether shareholder meetings have been held and minutes recorded, and whether the corporation has written bylaws. These are all formalities that corporations must satisfy under the Indiana Business Corporation Act, and failure to observe them is a factor that increases the possibility of the corporate veil being pierced, which can result in the shareholders being held personally liable for the debts and liabilities of the business.

Deciding which entity will best serve your business is only one part of the equation. Selecting the optimal tax regime will prove invaluable as your business grows. Corporations can be taxed under Subchapter C (C Corp) or Subchapter S (S Corp). New corporations are taxed as C Corps by default, incurring corporate taxes in addition to the federal income tax shareholders pay on dividends. This is sometimes called as “double taxation.” Conversely, S Corps do not pay corporate tax. They are known as “pass-through entities,” meaning owners report business income on their personal tax return. Not every corporation can be taxed under Subchapter S, and specific parameters must be met. On the other hand, LLCs have more alternatives. In addition to Subchapter C and Subchapter S, LLCs can be taxed as disregarded entities, which is equivalent to sole proprietorships, or under Subchapter K, more commonly known as partnerships.

Limited liability companies are, compared to partnerships and corporations, a relatively new form of business entity, and LLC law is still evolving. The overwhelming majority of businesses advised by Harshman, Ponist, Smith & Rayl are LLCs.  We can help you take advantage of the unique combination of features that only a limited liability company can provide.

One reason we favor LLCs over corporations for most business owners is that the Indiana Business Flexibility Act establishes very few required corporate formalities for LLCs, meaning there are fewer opportunities for those corporate formalities to be neglected, which in turn reduces the possibility (however slightly) that the corporate veil will be pierced.

A corporation is one of the most common forms of business organization. The organizational details are important, and overlooking what may seem like mundane formalities can leave your business vulnerable. Harshman, Ponist, Smith & Rayl can help you get it right.

Indiana and a few other states also have entities referred to as benefit corporations, which are business corporations expressly organized to serve purposes other than, or in addition to, turning a profit for the shareholders. They can be described as a compromise between business corporations and nonprofit corporations. Again, we can help you decide if a benefit corporation is right for you.

Partnerships offer other ways to organize a business. General partnerships consist of two or more people who conduct business together for their mutual benefit, each contributing services, money, or property in the interest of profits. A general partnership can be extremely simple to establish (in fact, people can establish partnerships without even knowing it!) but unlike corporations or LLCs, the partners are personally liable for the obligations of the partnership. All partners are jointly and severally liable for the debts, liabilities, and obligations of the partnership. For this reason, we rarely advise a client to conduct business as a general partnership rather than forming a corporation or LLC.

The Uniform Partnership Law also offers a convenient way to convert a general partnership into an entity with limited liability for all partners by registering as an LLP with the Indiana Secretary of state. Although LLPs offer many of the same benefits as LLCs, they are used far less often.

Limited partnerships (or LPs) were once commonly used to raise capital to fund a business (particularly those for which taxation as a partnership is more favorable than taxation as a corporation, such as real estate developers), but they have largely been supplanted by other structures. A limited partnership must have at least one general partner who is liable for the partnership’s obligations, and it may have any number of limited partners (typically passive investors) who enjoy the benefits of a liability shield. Limited liability for all owners is sometimes accomplished by having a corporation serve as the general partner.

There are also variations on the above themes, including professional limited liability partnerships and professional corporations that are available only to certain types of professional practices.

Serving as legal advisors to startup businesses is one of the cornerstones of our business law practice. We earn the trust of new business owners by learning about the business from Day One (really, before Day One), and offering sound, practical legal advice at a fair price. We offer steady guidance to startups as they make fundamental decisions about their business.

Startups are met with crucial decisions about their business from day one. Our experienced business law team ensures your startup is primed for success from launch.